Seattle is a desirable city for renters and real estate investors alike! Rental properties are always in high demand. However, neighborhood quality can vary greatly, and not all neighborhoods are created equal for investors.
While some areas have higher crime rates or quality properties, others don't offer as many amenities to tenants to keep rentals in demand. How can investors know where to buy their next rental property? Our Seattle property management experts go over a few factors that will help you identify which neighborhoods are the best for your needs.
A Neighborhood Can Lead to Success (or Failure)
When choosing a potential rental, the neighborhood can either boost your success—or lead to failure and lost income. Seattle neighborhoods are diverse in their demographics and housing stock, which can affect the availability and appeal of rental properties in certain areas. This market contains a variety of high-quality apartment buildings and single-family homes with contrasting low-quality properties that might never pay off for a rental owner.
A property manager recommends that investors carefully consider what kind of neighborhood they're looking for so as not to waste time (or money) on a purchase, only to find it's no longer adequate once they've bought it—or worse yet, unsafe!
The neighborhood surrounding your property can determine the type of tenants the rental attracts, vacancy rates, rental rates, and your returns. When investors decide where to start looking for their next property, there are several factors to consider when analyzing the property, area, and potential income. Prioritizing location can help investors avoid buying a property in an area of town where renters don't want to live.
Carefully Evaluate Areas Near Colleges
A single-family rental home, duplex, or apartment building near a university is a slam-dunk for a steady stream of renters, right? Maybe so—but make sure you consider the type of renters you're likely to get, and if that's a crowd you want to manage year after year. Rental homes near colleges and universities attract students. Landlords that provide student housing often deal with late rental payments, broken lease rules, too many residents in the property, and property damage. To make rentals near colleges successful, investors need property management experts to monitor tenant behavior, enforce the lease, and prioritize on-time rent collection.
Student housing can also require a significant maintenance budget to deal with tenant-caused damage (either accidental or intentional). When owning this type of rental, protect yourself with the right landlord liability insurance coverage and use a property manager to handle maintenance issues.
Beware of HOA Rules or City Ordinances
Choosing properties in higher-end neighborhoods can eliminate the issue of irresponsible student residents. However, you might find another set of challenges with HOA rules and fees or city and neighborhood ordinances.
Not every neighborhood is "rental friendly." Some areas might try to discourage investors from turning homes into rentals by imposing strict rules, high permit or licensing fees, and creating so much red tape that making any money from the property becomes nearly impossible. When evaluating returns, include the cost of HOA fees in your analysis. Set the monthly rent amount to cover those fees in addition to other ongoing expenses for the property. To avoid fines for HOA violations, work with a property management team to add rules into the lease agreement and enforce the rules with residents.
Apply Rental Market Analysis to Choose the Right Seattle WA Neighborhoods
The "right" neighborhoods for your real estate investment portfolio might be different from other investors that choose the Greater Seattle area. Depending on your financial goals, it's essential to evaluate areas of town that can help you meet those goals and maximize returns.
If you're not sure how to analyze a potential home or neighborhood, a property manager can help. They'll have the latest market research to apply a thorough rental analysis for potential investments. The right property management team also listens to your goals to help you find appropriate properties to meet those goals while navigating potential HOA rules, local ordinances, or other factors that could impact a loss of returns for your investments.
Understand Rental Property ROI
At the end of the day, the rent amount or cash in your pocket isn't the most important sign of success. Property managers recommend thinking about your total return on investment when buying a rental.
Your initial cash outlay for a down payment is part of that calculation, but don't forget to include other costs such as closing costs, loan origination fees, and title insurance—even if those are rolled into your mortgage payments. You should also consider costs to renovate a house, ongoing maintenance costs, and other expenses when evaluating returns. A property management expert can give you valuable insights into anticipated costs for operating your rental.
A Seattle Property Management Company Helps Investors Analyze Neighborhoods for Smart Investments
If possible, work with a Seattle Wa property management company that offers expert advice on ROI so you can create an accurate projection for properties in a neighborhood before investing. Real Property Associates has extensive experience throughout the city! We can deliver thorough rental market research and analyze the potential return on investment for a rental you have in mind. We also offer full-service property management services to boost your success.
Looking for a resource to help you evaluate rental property returns? Get our free Investment Property ROI Calculator!